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Modi Government relaxes FDI norms in Pharma, Defence, Aviation sectors

While FDI in defence sector was allowed up to 49% under the automatic route, beyond 49% was under approval route, albeit, with a condition which allowed access to “state-of-art” technology.

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“The changes in the FDI policy will ensure more investment in infrastructure creation and employment generation”, Food Processing Minister Harsimrat Kaur Badal said.

“The widened scope of FDI norms in defence, civil aviation, broadcasting services, and pharmaceuticals will provide a fillip to the potential of the US-India bilateral trade”, US India Business Council (USIBC) President Mukesh Aghi said while referring to a series of Foreign Direct Investment (FDI) reforms by India yesterday. But while looking at the proposals that call for investment beyond 49 per cent, a condition that they will bring with them access to “state-of-the-art” technology has been done away with.

With these new rules, however, it now appears that Apple qualifies for an exception of up to five years (though the Indian government has not yet explicity said so).

Under the changes, companies like Apple could move closer to opening stores in India after the government eased regulations on local sourcing.

With 100 per cent FDI allowed in pharma, mergers and acquisitions (M&A) by multinational companies are likely to intensify in the sector, attracting a sizeable amount of funds. For the pharmaceuticals sector, the Government relaxed the norms and permitted FDI up to 74 per cent through automatic route in brownfield projects and approval route beyond that limit to promote the development of this sector.

The major reform measures were decided at a high-level meeting chaired by Prime Minister Narendra Modi, which was earlier said to have been planned for tomorrow.

Additional requirement of Reserve Bank of India license has been done away with for Defence, Telecom, Private Security or Information and Broadcasting sectors, provided FIPB clearance has been obtained. Now, brownfield projects, too, will come under automatic route for up to 74 per cent. “With these changes, India is now the most open economy in the world for FDI”, the PMO statement said.

Paving way for iPhone maker Apple to open its own stores India, the government on Monday relaxed FDI norms by giving a three-year exemption from local sourcing to foreign players in single-brand retail and a further fiveyear relaxation for “state-of-art” and “cutting-edge” technology.

“The new policy wording communicates the realization that there may be several other genuine reasons for the government to allow more than 49 percent stake to the foreign OEM in a joint venture with an Indian company and they want to take advantage of these for the benefit of the indigenous industry”, Bausset told IANS. Grocery sales can be, if the government approves, fully open to FDI.

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The government also permitted 100 percent FDI in teleports, direct-to-home and cable networks as well as mobile TV – without the need for government approval.

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